Michael Mogan v. City of Chicago, a Municipal Corporation

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 22-2801
M ICHAEL M OGAN ,
Plaintiff-Appellant,
v.
C ITY OF C HICAGO, a Municipal Corporation, and
R OSCOE VILLAGE LOFTS C ONDOMINIUM A SSOCIATION ,
a Corporation,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:21-cv-01846 — Sara L. Ellis, Judge.
____________________
A RGUED NOVEMBER 8, 2023 — DECIDED S EPTEMBER 20, 2024
____________________
Before R OVNER , JACKSON -A KIWUMI , and PRYOR , Circuit
Judges.
R OVNER , Circuit Judge. This case involves a challenge to the
application of Chicago’s Shared Housing Ordinance (the
“Ordinance”). Michael Mogan, the owner of a condominium,
brought claims against the City of Chicago and the
homeowners association for his condominium unit, the

-- 1 of 14 --

2 No. 22-2801
Roscoe Village Lofts Association (“the Roscoe Association”).
He argued that he purchased and renovated his
condominium unit, #307, with the intention of renting it
through the shared-housing rental platform Airbnb, and that
the Ordinance prevented him from listing it on Airbnb or
other short term residential intermediary platforms. Mogan
alleged that application of the Ordinance to Unit 307
constituted an unconstitutional taking and similarly was an
inverse condemnation in violation of Illinois law. He also
sought a declaratory judgment against the City and the
Roscoe Association establishing that Roscoe Village Lofts and
the City have a duty to allow him to lease Unit 307 on a
weekly, monthly or annual basis on Airbnb, HomeAway or
other home sharing websites. The district court dismissed the
takings and inverse condemnation claims and declined to
exercise jurisdiction over any remaining state law claim, and
he now appeals. We hold that the district court properly
dismissed the case and did not abuse its discretion in
declining to exercise supplemental jurisdiction over
remaining state law claims.
The Ordinance at issue in this case provides, in relevant
part, that condominium homeowners associations may
determine that no licensed vacation rentals or shared housing
units (defined as short term rentals) are permitted to operate
anywhere within the building, and the association may notify
the Commissioner of Business Affairs and Consumer
Protection of that decision. Municipal Code of Chicago (MCC)
§ 4-13-260(a)(9). When that occurs, the building is added to
the “prohibited buildings list,” and units in the building may
not be registered with the City as shared housing units or
vacation rentals or listed on intermediary platforms such as
Airbnb. Id. at §§ 4-14-050(i), 4-6-300(h)(4), 4-13-260(a)(9). A

-- 2 of 14 --

No. 22-2801 3
party can request a hearing to contest a unit’s ineligibility and
can appeal the final determination. Id. at § 4-13-260(b). If a
host rents a unit that is on the prohibited buildings list 28 days
after the final notice of ineligibility, the host can be subjected
to a $5,000 fine per day that the violation continues. Id. at
§§ 4-14-050(i), 4-6-300(h)(4). And if a host fails to remove an
ineligible listing from a platform such as Airbnb after
receiving the final ineligibility determination from the City,
the host can be fined $5,000 per day that the violation
continues. Id. at §§ 4-6-300(h)(4), 4-14-030(c). The City
amended the Ordinance in 2020, adding a prohibition on
rentals of less than ten hours, severely restricting single-night
rentals, and limiting the maximum occupancy of shared
housing units to two adults per guest room and one person
per 125 feet of floor area of the unit. Id. at §§ 4-6-300(g)(5), 4-
14-050(b).
The Roscoe Village Loft condominiums are managed by
Property Solutions Chicago, and Pamela Chianelli is the sec-
retary and shareholder of Property Solutions. In August 2016,
the Roscoe Association and Chianelli sought the inclusion of
the Roscoe Lofts on the City’s prohibited buildings list, and
the City added the building to the list that same month.
Mogan argues that there was never a vote held by the Roscoe
Association to authorize the placement of the building on that
prohibited list.
By definition, “vacation rentals” and “shared housing
units” under the Ordinance are units which are rented to
transient guests, which in turn are defined as guests who rent
the unit for less than 31 days. Id. at §§ 4-14-010, 4-6-300(a), 4-
6-290(a). The Ordinance therefore applies to short term
rentals of a month or less. Mogan argues that he purchased

-- 3 of 14 --

4 No. 22-2801
the unit with the intent to lease it, and that he painted and
carpeted his condominium unit, and spent thousands of
dollars to furnish it, in order to generate leasing revenue. He
contends that he rented his unit in the past, and that he
intends to list his unit on Airbnb or other home sharing sites
in the future so that he can lease or license his entire unit to
guests on a nightly, weekly, monthly or annual basis. He also
maintains that the value of the condominium on the sales
market is significantly lower if it cannot be used as a short-
term rental. In addition, he argues that prior to passage of the
Ordinance and the placement of the building on the
Prohibited Building List, he was able to conduct short term
rentals of the unit, and that ability was a major part of his
decision to purchase the property. Mogan further asserts that
Chianelli has told him in the past that placing his unit on
Airbnb is not permitted under the declarations and bylaws,
and has threatened him with the possibility of fines being
imposed by the City of Chicago for running ads on Airbnb's
website.
Mogan brought claims against the City arguing that its
Ordinance violates the takings clause of the Fifth Amendment
and constitutes an inverse condemnation under the Illinois
Constitution. He argues that the City’s actions in prohibiting
short-term rentals constituted a regulatory taking. The City
contends that Mogan lacks standing for his claims against it,
and in the alternative that the court properly found that he
failed to state a valid claim.
In support of its claim that Mogan lacks standing to
challenge the Ordinance, the City points to our decision in
Keep Chicago Livable v. City of Chicago, 913 F.3d 618 (7th Cir.
2019), in which we held that each of the plaintiffs challenging

-- 4 of 14 --

No. 22-2801 5
that same Ordinance lacked standing. In order to establish the
“’irreducible constitutional minimum’” of standing, “[t]he
plaintiff must have (1) suffered an injury in fact, (2) that is
fairly traceable to the challenged conduct of the defendant,
and (3) that is likely to be redressed by a favorable judicial
decision.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016),
quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992);
Keep Chicago Livable, 913 F.3d at 622. At the pleading stage,
such as in this case, the plaintiff has the burden of clearly
alleging facts that are sufficient to demonstrate each of those
elements. Keep Chicago Livable, 913 F.3d at 623; Spokeo, 578 U.S.
at 338. “To establish injury in fact, a plaintiff must show that
he or she suffered ‘an invasion of a legally protected interest’
that is ‘concrete and particularized,’ and ‘actual or imminent,
not conjectural or hypothetical.’” Spokeo, 578 U.S. at 339,
quoting Lujan, 504 U.S. at 560.
In Keep Chicago Livable, we noted that standing must be
present at all points in litigation, and the individual plaintiffs
in that case failed to meet that standard. 913 F.3d at 622. One
of the plaintiffs in that case, who had used Airbnb to rent his
home, had then moved out of state and sold that home. Id. at
623. Other individual plaintiffs provided only a conclusory
allegation that because of the Ordinance, they had ceased
participating in home-sharing activities on Airbnb. Id. at 623–
24. We held that the claim by the first person was moot, and
the claims of the others failed to allege with any particularity
how the Ordinance, and not some other factor, prevented
their own home-sharing activities. Id.
In contrast, Mogan’s allegations in his Second Amended
Complaint include far more detail as to the adverse impact
the Ordinance has had on him in the past and continues to

-- 5 of 14 --

6 No. 22-2801
have on him presently. In that complaint, Mogan alleged an
infringement on his ability to profitably rent his unit as a
short-term rental and that he would rent his unit through
home-sharing websites such as Airbnb absent the excessive
fines imposed by the Ordinance. Mogan alleged that he pur-
chased the unit to rent it, including on a short-term basis, and
that he had already engaged in profitable short-term rentals
at Unit 307 on a limited basis and would have continued to do
so but for the Ordinance. In fact, he alleged that the ability to
list Unit 307 on all available online platforms was a major part
of his decision to purchase the property, and that he had re-
lied on rental income to pay for Unit 307 in the past. He al-
leged that using Unit 307 as a short-term rental on online plat-
forms such as Airbnb benefitted him by allowing him to use
Unit 307 as a second, vacation, home while collecting short-
term rental income to pay for the unit.
He asserted that the property had lost significant value
because the ability to rent short-term on online platforms such
as Airbnb enabled him to obtain a premium price.
Specifically, he noted that in the past, for rental terms of one
month, six months, or a year, on websites such as Craigslist
he could only rent Unit 307 for $1600 per month, whereas the
average monthly rental for a similar unit on Airbnb’s website
was $3200 and the average nightly rate was $120.
Accordingly, he alleged that he lost approximately $1600 a
month between December 2019 and January 2022, or $41,600,
because the City would not permit him to rent on online
platforms such as Airbnb, and that the lost profits continue
daily and monthly. He also alleged that the possible rental of
Unit 307 on other online platforms for the lower amount
would not justify the price he paid for Unit 307, whereas
rental through Airbnb is a profitable venture. He stated that

-- 6 of 14 --

No. 22-2801 7
his fixed mortgage was scheduled to be paid off in 26 years,
but that if permitted to earn the higher daily and monthly
rental income used by Airbnb users, he would have been able
to pay off the principal balance in less than seven years, with
substantial savings in interest paid. Furthermore, he asserted
that the ability to list a rental on Airbnb increases the property
value of a unit, and the City’s prohibition of short-term
leasing on online platforms such as Airbnb decreased the
value of Unit 307. He stated that the fair market value of Unit
307 is approximately 50% higher if short-term rentals are
permitted on online platforms such as Airbnb, and specified
that Unit 307 is worth $270,000 and would be worth $400,000
based on the ability to rent Unit 307 on a short-term basis on
Airbnb.
He also detailed the impact of the fines imposed by the
Ordinance. He explained that the Ordinance requires the
owner of a shared housing unit to register annually with the
City and that the registration is a prerequisite to the ability of
the person to establish and maintain a listing of a “Shared
Housing Unit” on internet platforms such as Airbnb and
HomeAway. Any person who fails to list a registration
number in his short term rental listing online is at risk of being
deemed ineligible to be a shared housing host and is subject
to fines from a minimum of $1500 to $3000 for each offense—
where each day of a violation constitutes a separate offense.
Moreover, he noted that the failure to remove a listing for a
unit in a building on a prohibited building list can subject an
owner to inordinate fines of up to $5000 per day for each day
that the listing is online, even if the condominium instruments
allow such activity. He noted that the risk of the fine is real,
and that Chianelli threatened him with the possibilities of
fines being imposed by the City for allegedly running ads on

-- 7 of 14 --

8 No. 22-2801
Airbnb’s website. Finally, he alleged that, but for the City’s
prohibition on short-term rentals and extremely high fines, he
would conduct short-term rentals at Unit 307.
Those allegations demonstrate standing to challenge the
Ordinance. Mogan establishes that he rented his unit in the
past and will do so in the future, that the profitability of short-
term renting is directly impacted by the ability to list on
platforms such as Airbnb, that the excessive fines provided
for in the Ordinance have deterred him from listing his unit
currently, and that he would conduct short-term rentals of his
unit on platforms such as Airbnb absent that Ordinance. He
also demonstrates that the inability to list his unit on Airbnb
under the Ordinance has an impact on the market value of his
unit. Those allegations are sufficient to allege an injury in fact
fairly traceable to the challenged conduct of the defendant
and likely to be redressed by a favorable judicial decision.
We turn, then, to the merits of the claims asserted in his
Second Amended Complaint, which included claims against
the City alleging a taking in violation of the Fifth Amendment
and inverse condemnation under Illinois law, and a claim for
declaratory judgment against the City and the Roscoe
Association. Mogan argues that the district court erred in
holding that prohibiting short term rentals denied only one
bundle of property rights and did not rise to the level of a
regulatory taking, and in rejecting his takings and inverse
condemnation claims on that basis. He then reasons that
because the court erred in dismissing those claims, it also
improperly determined that there was no basis remaining for
a declaratory judgment against the City and declined to
exercise supplemental jurisdiction over the remaining state
law claims.

-- 8 of 14 --

No. 22-2801 9
Mogan argues that he cannot afford Unit 307 without
short term rental income because it is impossible to
sustainably lease Unit 307 under long-term leases and long-
term rental income is much lower than short-term rental
income. He describes the property right at stake here as
including his right to use and rent Unit 307 for less than 30
days, and challenges the City’s authority to interfere with or
restrict that right when, according to Mogan, such rentals are
permitted under the Roscoe Village Lofts bylaws and
Declaration and the City had not regulated short term rentals
for over 180 years. He contends that the City’s restrictions on
short-term rentals and its penalties for such rentals constitute
an unlawful regulatory taking.
The Takings Clause of the Fifth Amendment, made
applicable to the States through the Fourteenth Amendment,
ensures that private property not be taken for public use
without just compensation. Murr v. Wisconsin, 582 U.S. 383,
392 (2017). That language does not directly address the
situation in which property is not directly taken but where
significant regulatory burdens are imposed on private
property that impede its use. Id. The Supreme Court has long
recognized, however, that “’while property may be regulated
to a certain extent, if regulation goes too far it will be
recognized as a taking.’” Id. at 393, quoting Pennsylvania Coal
Co. v. Mahon, 260 U.S. 393, 415 (1922). Accordingly, subject to
certain exceptions, “a regulation which denies all
economically beneficial or productive use of land will require
compensation under the Takings Clause.” Id. at 393 (internal
quotations marks omitted). Moreover, “when a regulation
impedes the use of property without depriving the owner of
all economically beneficial use, a taking still may be found
based on ‘a complex of factors,’ including (1) the economic

-- 9 of 14 --

10 No. 22-2801
impact of the regulation on the claimant; (2) the extent to
which the regulation has interfered with distinct investment-
backed expectations; and (3) the character of the
governmental action.” Id. That test for regulatory taking
necessarily requires a comparison of the value that has been
taken from the property with the value that remains in it, and
therefore a critical question is to define the unit of property
and the extent that a portion has been taken. Id. at 395.
Before addressing the legal issues, there is a factual issue
that needs to be highlighted because it is important to the
resolution of the claims. When Mogan purchased his
condominium unit in the building in 2004, his rights with
respect to the unit were subject to the Declaration of
Condominium Ownership (“Declaration”) and by-laws of the
Roscoe Association, which were recorded with the Cook
County Recorder of Deeds in 1993. Therefore, from the time
of his purchase of that property, his ability to rent out his unit
was subject to any restrictions in those documents. Mogan’s
original complaint, First Amended Complaint, and Second
Amended Complaint, all misrepresented the language in the
Declaration, and the district court used that inaccurate
language in its Opinion and Order. Mogan attached the actual
Declaration to his original complaint, and the difference in the
language is apparent when comparing that with the quote in
the complaint. Mogan in his complaints set forth the relevant
section from the Declaration, entitled “Lease of Units or
Sublease or Assignment of Lease thereof,” quoting it in
whole, but misquoting the controlling sentence. The
Declaration begins by stating that “[a]ny Unit Owner shall
have the right to lease … his Unit, upon such terms and
conditions as the Unit Owner may deem acceptable,” but then

-- 10 of 14 --

No. 22-2801 11
qualifies that right with an exception. Mogan quoted the
Declaration’s exception as follows:
except that no Unit shall be leased, subleased or
assigned for transient or hotel purposes, which
are hereby defined as being for a period of less
than thirty (30) days where hotel services nor-
mally furnished by a hotel (such as room service
and maid service) are furnished.
Mogan then argued to the district court that he never
provided room service or maid service, and therefore that
under the terms of the Declaration he had an expectation that
he would be allowed to pursue short-term rentals of his unit.
But the actual language in the Declaration is materially
different, and eviscerates his claim of an expectation of
engaging in short-term rentals. The Declaration, which was
attached as an exhibit to his original complaint, sets forth the
leasing exception as follows:
except that no Unit shall be leased, subleased or
assigned for transient or hotel purposes, which
are hereby defined as being for a period of less
than thirty (30) days or for a period of more
than thirty (30) days where hotels services nor-
mally furnished by a hotel (such as room service
and maid service) are furnished.
(emphasis added).
The bolded language is missing from the body of the
complaints, and no ellipsis is used to indicate its omission.
The district court’s order then tracked the erroneous language
in the complaints, but that omitted language changes the
meaning significantly. Under Mogan’s versions, leases for

-- 11 of 14 --

12 No. 22-2801
less than 30 days are allowed unless hotel services are
provided. He then alleged in the complaints that he had not
provided in the past such services normally provided by
hotels, nor did he intend to do so in the future.
But the actual language of the Declaration provides that
no leases of less than 30 days are allowed, and no leases for
more than 30 days are allowed where hotel services are
furnished. The “hotel services” language clearly modifies
only the leases of more than 30 days, because otherwise the
distinction between leases of less than 30 days and more than
30 days would have no meaning. Transient leases and hotel
leases are prohibited, and that includes: (a) any leases of less
than 30 days; and (b) any leases of more than 30 days where
hotel services are provided. “Transient” rentals are similarly
defined in the Ordinance in this case as rentals for less than a
month. Based on the plain language of the Declaration, which
controlled the rights and expectations of persons purchasing
a condominium unit in that building, Mogan was aware from
the time that he purchased Unit 307 that he had no right to
lease the unit for periods of less than 30 days, and in fact was
prohibited from doing so.
And that defeats his claims under the takings clause or
inverse condemnation. Considering the factors for a
regulatory taking, in light of the language in the Declaration
prohibiting short-term rentals of less than 30 days, Mogan
cannot demonstrate any economic impact of the Ordinance on
him, nor can he demonstrate that the Ordinance has
interfered with any reasonable investment-backed
expectations. In fact, not only did he lack any such reasonable
expectation, he would have been on actual notice before
purchasing the property that leases of less than 30 days are

-- 12 of 14 --

No. 22-2801 13
not allowed. And the Ordinance challenged here, and the
prohibited buildings list, applies only to short-term leases of
less than 31 days.
Mogan argues that he in fact rented the unit on a short-
term basis, but that does not change the nature of the property
interest he possessed. We need not consider whether the
Roscoe Association “allowed” such short-term rentals to
occur because of ignorance, indifference, incompetence, or
tacit acceptance. Even if Mogan was able to pursue such
short-term rentals of Unit 307 for a time, the Declaration at the
time of the purchase made clear that the unit could not be
rented for periods of less than 30 days. Therefore, the
property interest that he obtained in the unit never included
the right of short-term rentals, and in fact expressly excluded
that right. Because the property was restricted in that manner
from the outset and the Declaration was never changed, he
never experienced any adverse economic impact from the
Ordinance, nor any interference with distinct investment-
backed expectation because he never had any reasonable
expectation that the property could be used for short-term
rentals. Accordingly, the district court properly dismissed his
takings clause claim. Mogan raises no independent argument
as to the inverse condemnation claim, conceding that the
inverse condemnation claim applies the same standard as the
takings clause claim and therefore that claim was properly
dismissed as well. The district court did not abuse its
discretion in declining to exercise supplemental jurisdiction
over the remaining state law claim, given its dismissal of the
federal claims. See Carlsbad Technology, Inc. v. HIF Bio, Inc., 556
U.S. 635, 639–40 (2009) (recognizing that a district court’s

-- 13 of 14 --

14 No. 22-2801
decision as to whether to exercise supplemental jurisdiction is
purely discretionary and is reviewed for abuse of discretion).
The decision of the district court is AFFIRMED.

-- 14 of 14 --